I’ve followed the cannabis space for a long time now, and in my years observing marijuana stocks, I’ve come to one very important conclusion: there are a lot of pot stocks out there, but only a handful of them will turn into long-term winners. Most of them will fall to zero in the long-run.
This is an important observation to keep in mind when thinking about HEXO Corp (NYSE:HEXO) stock. HEXO is yet another Canadian cannabis company which wants to take over the world with its cannabis-infused products. Also, like many of its peers, HEXO is selling investors the pipe dream that it can be a very important player in what looks poised to become a multi-hundred billion global cannabis market.
That may happen. If it does, those who buy Hexo stock now will be making the investment of a lifetime.
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But Hexo stock probably won’t make that dream come true. Instead, the most likely outcome for HEXO isn’t billion-dollar profits. Rather, the company will probably get squeezed out of the cannabis market by larger and better-equipped players.
That’s why, time and time again, I’ve told investors to stay away from Hexo stock. I’m reiterating that recommendation today. Until the company gives investors some tangible and convincing reason why it will be a long term winner in the cannabis market, investors should stay away from HEXO stock.
Here is an accurate, common-sense concept that investors tend to forget every time a new growth market emerges. Early-stage growth markets usually attract many companies. but late-stage growth markets usually have only a few winners.
When growth markets are in their early stages, everyone and their best friend wants to get into the space because it has so much long-term growth potential. As a result, a bunch of companies emerge in early-stage growth markets. But the markets cannot support all that supply, since demand is finite.
Consequently, as the market matures, a few companies become large players, and they proceed to wipe-out everyone else in the space. As a result, 95% of companies in early=stage growth markets disappear, while 5% turn into long-term winners.
That has happened time and time again throughout the course of U.S. history.
Think about the emergence of the internet space. Many internet companies like Boo.com, Webvan, Pets.com, Kozmo, Geocities emerged initially. But of the thousands of dot-com companies that were launched during the late 1990s, only a handful – like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG) – survived and thrived over the long-term.
Or think about the emergence of the blockchain in 2017-18. The shares of any company that said it was somehow involved with the blockchain went parabolic. Now, even though bitcoin has staged a meaningful recovery, many of those “blockchain companies” are no longer relevant. For example, take a look at a three-year chart of Overstock.com (NASDAQ:OSTK).
All new growth markets go through the same cycle. Investors get euphoric about them. A bunch of companies emerge in an effort to capitalize on that euphoria. The shares of all those companies rally as though they will all turn into long-term winners, but only a few achieve the dream. The rest suffer a painful demise.
The unfortunate reality is that the cannabis industry will endure a cycle that is similar to what the internet space and the blockchain industry experienced.
That means that of the hundreds of cannabis companies out there today, only a select few will become winning investments over the long-term.
Right now, Hexo stock is not well-positioned to become one of the sector’s long-term winners. The company sold less than 3,000 kilograms of cannabis last quarter, far less than the 10,000-plus kilograms per quarter that the industry leaders sold. Last quarter, HEXO’s’s sales volume rose 9% versus the previous quarter. That’s unimpressive relative to the double-digit-percentage growth rates that most other cannabis companies are delivering. In Q2, its net revenue actually dropped quarter-over-quarter, and its net loss widened . Its balance sheet, with about $130 million in cash, is very small relative to the multi-billion dollar balance sheets of Canopy (NYSE:CGC) and Cronos (NASDAQ:CRON).
In other words, there’s nothing terribly special about Hexo stock which will enable it to become a long-term winner.
Unless the company does develop such a catalyst, HEXO stock price will most likely end up at zero.
Stay away from HEXO for the foreseeable future. At this point, HEXO appears to be an unattractive company in the right space. But that could all change, and quickly. If it does change, Hexo stock price will turn into a long-term multi-bagger.
But until that happens, HEXO stock is facing enough risks to warrant staying on the sidelines for the time being.
As of this writing, Luke Lango was long CGC.
这是在考虑 HEXO 公司（ NYSE ： HEXO ）股票时要记住的一个重要观察。HEXO 是另一家加拿大大麻公司，该公司希望通过其注入大麻的产品占领世界。此外，与许多同行一样， HEXO 也在向投资者推销自己的“管道梦想”，即它可以成为一个非常重要的参与者，看起来有望成为一个规模达数千亿美元的全球大麻市场。
这可能会发生。如果是这样的话，那些现在购买了 Hexo 股票的人将会终生投资。
但 Hexo 的股票可能不会让这个梦想成为现实。相反， HEXO 最有可能的结果不是10亿美元的利润。相反，该公司可能会被规模更大、设备更好的玩家挤出大麻市场。
这就是为什么，一次又一次，我告诉投资者远离 Hexo 股票。我今天重申这一建议。在该公司向投资者提供一些切实和令人信服的理由，说明为何它将成为大麻市场的长期赢家之前，投资者应远离 HEXO 股票。
想想互联网空间的出现。许多互联网公司如 Boo 。Webvan ， Pets 。网站， Kozmo ， Geocities 最初出现。但在上世纪90年代末推出的数千家网络公司中，只有少数几家——如亚马逊( Amazon )( NASDAQ : AMZN )和 Alphabet ( NASDAQ : GOOG )——长期存活并蓬勃发展。
或者想想2017-18年区块链的出现。任何表示以某种方式与区块链有关的公司的股票都是抛物线式的。现在，尽管比特币已经实现了有意义的复苏，但其中许多“区块链公司”已不再相关。例如，看看 Overstock 的三年图表。纳斯达克.
目前， Hexo 股票还没有做好成为该行业长期赢家之一的准备。该公司上季度出售的大麻数量不足3000公斤，远低于业内领先企业每季度销售的1万公斤以上。上季度， HEXO 的销售量比上一季度增长了9%。相对于大多数其他大麻公司实现的两位数增长率，这一点并不明显。在第二季度，该公司的净收入实际上环比下降，净亏损扩大。与 Canopy （ NYSE ： CGC ）和 Cronos （ NASDAQ ： CRON ）数十亿美元的资产负债表相比，其资产负债表（现金约1.3亿美元）非常小。
换句话说，对 Hexo 股票没有什么特别之处，这将使它成为长期的赢家。
除非该公司真的开发出这样的催化剂，否则 HEXO 的股价很可能会以零结尾。
在可预见的未来远离 HEXO 。在这一点上， HEXO 似乎是一个没有吸引力的公司在正确的空间。但这一切都可能很快改变。如果它真的发生变化， Hexo 的股价就会变成一个长期的多囊袋。
但在这种情况发生之前， HEXO 股票面临足够的风险，需要暂时留在场外。
在这篇文章中，卢克朗戈是 CGC 的老大。